legalize it! —

Regulators shift gears on car-sharing services, rescind $20,000 fine

Lyft can continue operating while CA officials make new rules.

More than two months after California regulators slapped a San Francisco car-service startup with a $20,000 fine, they appear to be changing their tune.

Lyft co-founder John Zimmer told Ars in November the California Public Utilities Commission's fine was misguided and he would appeal it. "We are not a charter-party carrier, we are a peer-to-peer carrier," he said. "I think it's clear to everyone that the current framework doesn't fit modern technology and possibilities."

The CPUC said today (PDF) it has entered into an agreement with Zimride, which operates the Lyft mobile app, so that it can continue to operate while the CPUC creates new rules about such services. The agreement suspends the cease-and-desist notice sent to Zimride, as well as the $20,000 fine.

Regulators said today they intend the new rules to include stringent safety requirements "that include continued proof of insurance, Department of Motor Vehicles checks, and national criminal background checks."

Update: Rival car service Uber has a blog post hailing the California decision.

20 Reader Comments

It continues to confound me why the same government officials who advocate mass transit work to inhibit the lowest resolution of mass transit - people sharing rides with those who either don't have a car or don't want to drive their car for a specific reason.

It continues to confound me why the same government officials who advocate mass transit work to inhibit the lowest resolution of mass transit - people sharing rides with those who either don't have a car or don't want to drive their car for a specific reason.

At least in TX you have to have insurance to register your car, and an inspection to drive it. So the laws should already be in place. You could cheat on insurance by dropping it after registering (for a while, at least), but that seems like an unusual case. Seems to me that the relevant laws should only be "your vehicle is legal" and "you properly report income", which are already on the books.

If you start making a living off of Lyft, or started a business around it, I could see bumping it into a business category; but if it's one person making a drive or two a day? Regulation seems more trouble than it's worth.

It continues to confound me why the same government officials who advocate mass transit work to inhibit the lowest resolution of mass transit - people sharing rides with those who either don't have a car or don't want to drive their car for a specific reason.

Campaign contributions lead to crony capitalism.

Union pressure could be a reason, but that's just speculation on my part. Who knows why they do what they do. There may not even be a reason.

It continues to confound me why the same government officials who advocate mass transit work to inhibit the lowest resolution of mass transit - people sharing rides with those who either don't have a car or don't want to drive their car for a specific reason.

Regulators regulate in order to cover their ass. Unless there's a lot of push back they'll choose the toughest regulations that they can think of, in order to assure that when something goes wrong, no one could conceivably blame them.

At least in TX you have to have insurance to register your car, and an inspection to drive it. So the laws should already be in place. You could cheat on insurance by dropping it after registering (for a while, at least), but that seems like an unusual case. Seems to me that the relevant laws should only be "your vehicle is legal" and "you properly report income", which are already on the books.

If you start making a living off of Lyft, or started a business around it, I could see bumping it into a business category; but if it's one person making a drive or two a day? Regulation seems more trouble than it's worth.

These laws are the same in Arizona, yet both times I've been rear-ended - the other party was uninsured and displaying current registration.

Thus, some sort of gap exists - I suspect exactly what you described - that insurance is garnered for a month - they register and then they drop the insurance.

At least in TX you have to have insurance to register your car, and an inspection to drive it. So the laws should already be in place. You could cheat on insurance by dropping it after registering (for a while, at least), but that seems like an unusual case. Seems to me that the relevant laws should only be "your vehicle is legal" and "you properly report income", which are already on the books.

If you start making a living off of Lyft, or started a business around it, I could see bumping it into a business category; but if it's one person making a drive or two a day? Regulation seems more trouble than it's worth.

California doesn't require regular vehicle inspection for non-commercial use. Insurance minimums are higher for commercial use as well, and non commercial insurance may not cover commercial use or arguable commercial use.

I got down-voted for stating the obvious problems with allowing anyone to share their car or to drive you? There are legitimate reasons why taxis are licensed. Anyone who doesn't understand why hasn't taken a cab in a third world country. It's terrifying.

The guys at Lyft and Uber aren't nice guys who want to free you from the tyranny of evil livery companies -- they're out to make a quick buck at your expense. I'm not the only one who thinks so.

I got down-voted for stating the obvious problems with allowing anyone to share their car or to drive you? There are legitimate reasons why taxis are licensed. Anyone who doesn't understand why hasn't taken a cab in a third world country. It's terrifying.

The guys at Lyft and Uber aren't nice guys who want to free you from the tyranny of evil livery companies -- they're out to make a quick buck at your expense. I'm not the only one who thinks so.

And try not to down-vote posts simply because you don't agree with them, but can't refute them using words.

I'm not going to argue that Travis Kalanick isn't some borderline randian sociopath... but that whole line of reasoning, and the article you referenced, is mostly irrelevant to the company highlighted here - Lyft. Moreover, that article really just latches on to some choice quotes from Kalanick, who is certainly arrogant, and then extrapolates them to the entire collaborative consumption industry (and the AirBnb reference misrepresents the situation - because it doesn't discuss how they now have a $1 million dollar protection policy.)

Lyft was founded on (and evaluates its drivers based on) the criteria that people are getting in to a car that is "like your friend is picking you up". I believe one of the founders said something like "a car he would feel safe sending his girlfriend home in". Sure, it would be naive to say that they are never going to mess that one up... but it would be crazy to say that they couldn't achieve a level of safety similar to existing taxi services.

There are certainly problems with taxi services - unlicensed, AND licensed. But the reality is - even in regulated, taxi-dense NYC - the experience is terrible. Taxis may not be very dangerous here anymore, but they are still largely rude, expensive, and hard to find when you need them. Lyft isn't just providing a p2p taxi service - it's providing an entirely new form of transportation by making the experience profoundly better in every way. The drivers are talkative and interesting. The cars have personality. The app is great. The rides are cheap. The payment system is empowering and rewarding. And best of all - the experience of booking a car whenever you need it and knowing exactly when and where it will arrive is FANTASTIC.

A complete taxi free-for-all would definitely have problems. But it would be moronic to limit the creation of amazing new ways of getting around a city just because entrenched taxi interests scare the rest of the world into preventing it.

A complete taxi free-for-all would definitely have problems. But it would be moronic to limit the creation of amazing new ways of getting around a city just because entrenched taxi interests scare the rest of the world into preventing it.

No one has limited ZipCar because of entrenched taxi interests. ZipCar is able to give people wheels on demand just as you described, but a real company is responsible for placing the cars in a safe area for people to pick up, as well as the maintenance of the cars.

I got down-voted for stating the obvious problems with allowing anyone to share their car or to drive you? There are legitimate reasons why taxis are licensed. Anyone who doesn't understand why hasn't taken a cab in a third world country. It's terrifying.

The guys at Lyft and Uber aren't nice guys who want to free you from the tyranny of evil livery companies -- they're out to make a quick buck at your expense. I'm not the only one who thinks so.

And try not to down-vote posts simply because you don't agree with them, but can't refute them using words.

I'm not going to argue that Travis Kalanick isn't some borderline randian sociopath... but that whole line of reasoning, and the article you referenced, is mostly irrelevant to the company highlighted here - Lyft. Moreover, that article really just latches on to some choice quotes from Kalanick, who is certainly arrogant, and then extrapolates them to the entire collaborative consumption industry (and the AirBnb reference misrepresents the situation - because it doesn't discuss how they now have a $1 million dollar protection policy.)

Lyft was founded on (and evaluates its drivers based on) the criteria that people are getting in to a car that is "like your friend is picking you up". I believe one of the founders said something like "a car he would feel safe sending his girlfriend home in". Sure, it would be naive to say that they are never going to mess that one up... but it would be crazy to say that they couldn't achieve a level of safety similar to existing taxi services.

There are certainly problems with taxi services - unlicensed, AND licensed. But the reality is - even in regulated, taxi-dense NYC - the experience is terrible. Taxis may not be very dangerous here anymore, but they are still largely rude, expensive, and hard to find when you need them. Lyft isn't just providing a p2p taxi service - it's providing an entirely new form of transportation by making the experience profoundly better in every way. The drivers are talkative and interesting. The cars have personality. The app is great. The rides are cheap. The payment system is empowering and rewarding. And best of all - the experience of booking a car whenever you need it and knowing exactly when and where it will arrive is FANTASTIC.

A complete taxi free-for-all would definitely have problems. But it would be moronic to limit the creation of amazing new ways of getting around a city just because entrenched taxi interests scare the rest of the world into preventing it.

I have no issue with someone trying to make a better taxi service. I take issue when a business tries to make people believe they are running something else so they can avoid paying their taxes and following the laws that were put in place for a reason.

This is not a bunch of friends trying to help each other out with a car share. This is a business wanting to make money by hiring people they don't know to transport other people they don't know to places the driver was not going to go to without being paid.

How the arrangement is brokered is not relevant. You are a taxi service with all the overheads that brings.

At least in TX you have to have insurance to register your car, and an inspection to drive it. So the laws should already be in place. You could cheat on insurance by dropping it after registering (for a while, at least), but that seems like an unusual case. Seems to me that the relevant laws should only be "your vehicle is legal" and "you properly report income", which are already on the books.

If you start making a living off of Lyft, or started a business around it, I could see bumping it into a business category; but if it's one person making a drive or two a day? Regulation seems more trouble than it's worth.

These laws are the same in Arizona, yet both times I've been rear-ended - the other party was uninsured and displaying current registration.

Thus, some sort of gap exists - I suspect exactly what you described - that insurance is garnered for a month - they register and then they drop the insurance.

But adding further regulation won't alleviate the situation; they're already willing to break the law.

Think of it this way: it's illegal to break into someone's home and steal their belongings. That being the case, what would be benefit of a law against breaking into someone's home, stealing their stuff, then selling it? If it's already the law, why make a new law about it?

I'm not saying that it shouldn't be illegal to be unregistered/uninsured or anything, I'm just saying that nothing new would be covered by the law assuming the drivers are treated as consumers rather than a business.

Now, when they should be treated as a business is a different question, and one I'm not familiar with cab laws about to offer any speculation.

At least in TX you have to have insurance to register your car, and an inspection to drive it. So the laws should already be in place. You could cheat on insurance by dropping it after registering (for a while, at least), but that seems like an unusual case. Seems to me that the relevant laws should only be "your vehicle is legal" and "you properly report income", which are already on the books.

If you start making a living off of Lyft, or started a business around it, I could see bumping it into a business category; but if it's one person making a drive or two a day? Regulation seems more trouble than it's worth.

California doesn't require regular vehicle inspection for non-commercial use. Insurance minimums are higher for commercial use as well, and non commercial insurance may not cover commercial use or arguable commercial use.

Huh, odd, I thought regular inspections were pretty much universal in the US for street-legal vehicles.

And the insurance thing is much the same in Texas; you have to have a higher minimum if you use a vehicle commercially, maybe some other stuff. I don't remember anymore. However, the insurance coverage of passengers should still apply normally, especially as Lyft themselves offers $1M in what should be considered insurance to their drivers.

A complete taxi free-for-all would definitely have problems. But it would be moronic to limit the creation of amazing new ways of getting around a city just because entrenched taxi interests scare the rest of the world into preventing it.

No one has limited ZipCar because of entrenched taxi interests. ZipCar is able to give people wheels on demand just as you described, but a real company is responsible for placing the cars in a safe area for people to pick up, as well as the maintenance of the cars.

ZipCar invalidates your point about entrenched taxi interests.

Well, except for the fact that the usage scenarios (and experiences) of ZipCar vs. Lyft are completely different.

Lyft is for getting places by car (short trips). Zipcar is for doing things that require a car (long trips). They are not competing for the same trip types. Zipcar is not competing against taxis. They are serving very different markets.

Well, except for the fact that the usage scenarios (and experiences) of ZipCar vs. Lyft are completely different.

Lyft is for getting places by car (short trips). Zipcar is for doing things that require a car (long trips). They are not competing for the same trip types. Zipcar is not competing against taxis. They are serving very different markets.

ZipCar is intended for things like shopping trips and interviews a few towns over. I don't know how that makes it a long trip use case. Conceivably, one could take a taxi instead of a ZipCar for these cases, so the conspiracy theories about taxi boogeymen would apply to ZipCar as well.

Lyft styles itself as not needing external regulation as it is self-regulating while at the same time being largely hands-off. I find this incredibly naive. Something will happen.

Lyft styles itself as not needing external regulation as it is self-regulating while at the same time being largely hands-off. I find this incredibly naive. Something will happen.

Many things work well in small use cases but don't scale well. I think this is going to be one of them. I can't see self-regulating working on a larger scale - especially where cash is involved. That is going to bring on some people looking to make a quick buck without caring about the regulations.

There's a reason that personal and business insurance premiums are different.

California doesn't require regular vehicle inspection for non-commercial use. Insurance minimums are higher for commercial use as well, and non commercial insurance may not cover commercial use or arguable commercial use.Huh, odd, I thought regular inspections were pretty much universal in the US for street-legal vehicles.

And the insurance thing is much the same in Texas; you have to have a higher minimum if you use a vehicle commercially, maybe some other stuff. I don't remember anymore. However, the insurance coverage of passengers should still apply normally, especially as Lyft themselves offers $1M in what should be considered insurance to their drivers.

California only requires a mandatory "Smog Inspection" every 2 years to register your car with the DMV. And this is required only for cars with full cumbustion engines. My Honda hybrid is exempt from the mandatory smog check as are all alternative fuel vehicles, including other hybrids like the Toyota Prius, natural gas powered vehicles, and the all-electric vehicles such as the Tesla, Chevy Volt and Nissan Leaf. I don't know if bio-diesel cars have to be smog checked, but I doubt it, since they fall under the alternative fuel category.

I grew up in Texas as the son of a mechanic, so I thought it was insane to not require vehicles to pass a safety inspection every 12 months. This was generally covered as routine maintenance, since my dad would always rotate the tires, check the brake pads, and adjust the headlights on every car he inspected before issuing a certificate.